Gold Producer Stocks Rise, Check Out the Prospects According to Analysts

Although gold prices are still relatively declining amid ongoing geopolitical conflicts in the Middle East, stock prices of those commodity producers are beginning to rise.

Most gold producer stocks show recovery at least over the past week. For example, PT Amman Mineral Internasional's stock price surged sharply by 15.43% in the last week to Rp 5,425 per share as of Friday (10/4).

At the same time, PT Bumi Resources Minerals Tbk (BRMS) jumped 14.97% to Rp 845 per share. PT Archi Indonesia Tbk (ARCI) also soared 10.25% to Rp 1,560 per share.

Additionally, PT Aneka Tambang Tbk (ANTM) increased 1.92% over the past week to Rp 3,710 per share. Conversely, PT J Resources Asia Pasifik Tbk (PSAB) remained at Rp 510 per share despite experiencing volatility over the past week.

A different fate was experienced by PT Merdeka Copper Gold Tbk (MDKA), which corrected 1.23% over the past week to Rp 3,220 per share. Similarly, PT Merdeka Gold Resources Tbk (EMAS) weakened 0.91% to Rp 8,125 per share.

Arinda Izzaty, an analyst at Pilarmas Investindo Sekuritas, said that the recent strengthening of gold producer stocks is more driven by a combination of forward-looking factors rather than just the current spot gold prices.

In this case, although gold prices are relatively stagnant around US$ 4,700 per troy ounce, the market is beginning to price in the potential decrease in global benchmark interest rates, the weakening of the US dollar (AS), and increasing geopolitical risks, which revive gold's function as a safe haven asset.

Moreover, specific company factors are also quite dominant. For example, optimism about expansion and increased production volume at AMMN and BRMS, cost structure improvements, and expectations of better margins if energy prices stabilize.

"These stock increases may not necessarily reflect a short-term rebound in gold prices but are more about expectations of a bullish gold cycle in the medium term," he said on Friday (10/4).

From a valuation perspective, Arinda said some gold stocks like ANTM and MDKA are already at relatively fair to premium levels due to price-to-book value (PBV) or enterprise value (EV)-EBITDA ratios above the historical average. Meanwhile, second-tier stocks like BRMS and ARCI are still undervalued because they are in early growth phases and optimizing gold reserves.

Meanwhile, market observer and founder of Republik Investor, Hendra Wardana, assesses that some gold stocks have attractive valuations, especially for those that have not fully reflected future production potential.

However, investors need to be more selective with gold stocks that have already rallied significantly, as their valuations are starting to approach fair value.

Overall, the prospects for gold producers remain quite attractive, especially considering the global monetary policy trend toward easing and the potential weakening of the US dollar.

In such conditions, gold prices historically tend to strengthen because the opportunity cost of holding gold becomes lower. Additionally, ongoing geopolitical tensions will continue to support gold prices in the medium to long term.

However, the growth potential of gold company performance is not unlimited. Challenges such as rising production costs, energy price fluctuations, operational risks, and regulatory issues remain factors that each issuer must consider.

"Companies with large reserves, efficient production costs, and clear expansion plans will be more competitive than those relying solely on commodity prices," he said on Friday (10/4).

To achieve optimal performance, gold companies need to strengthen strategies such as maintaining cost efficiency to stay competitive amid commodity price fluctuations.

These companies should also accelerate new project development to increase production volume and keep their financial structure healthy despite large capex needs. Diversifying into other minerals like copper is also a strategic step, as it can provide a buffer when gold prices correct.

Similarly, Arinda believes that gold producers must be disciplined in controlling costs to remain competitive amid commodity price volatility. Next, they need to accelerate exploration and development of new reserves to ensure sustainable production.

Furthermore, gold companies should optimize their core asset portfolios, including divesting non-core assets or high-cost mines. Downstream integration or diversification into other strategic minerals can also be options to hedge against the gold cycle.

"Conservative financial management with low leverage and strong liquidity is crucial to maintaining flexibility when commodity cycles turn," Arinda added.

Then, Arinda recommends investors consider stocks of ANTM and MDKA with target prices of Rp 4,800 per share and Rp 3,700 per share, respectively.

On the other hand, Hendra considers gold sector stocks still attractive as part of a defensive play and tactical trading amid global market volatility.

ANTM stocks are recommended as a speculative buy with a target around Rp 4,000 per share. The same recommendation applies to BRMS with a target price of Rp 965 per share.

ARCI, EMAS, and AMMN are also worth watching, with target prices of Rp 1,770 per share, Rp 9,000 per share, and Rp 6,075 per share, respectively. MDKA stocks are also recommended as a speculative buy with a target price of Rp 3,540 per share.

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